Shale funders look at the economics today and see a lot of projects that work in the $40 to $55 range,

OPEC wants to push oil prices to $60. At $60 the price of gas would be around $2.35/gallon plus tax. That would be good for EVs. Good, not great. It would make it about half as much per mile for an EV vs. a 40 MPG ICEV (plus oil changes).

I don't really understand the graph. I have an understanding of what "rig count" means, but what is "rig count lag", and how do they project values into the future? Production, it appears, is self explanatory. (An internet search of "rig count lag" didn't help!) If there was no "lag", would the green and blue lines be close to each other or would there be no future values, or both?(Thanks in advance.)

I don't really understand the graph. I have an understanding of what "rig count" means, but what is "rig count lag", and how do they project values into the future? Production, it appears, is self explanatory. (An internet search of "rig count lag" didn't help!) If there was no "lag", would the green and blue lines be close to each other or would there be no future values, or both?(Thanks in advance.)

Rigs drill, after drilling there is a lag from completion to fracking to production. Some producers drill fast ( to increase drilling rig productivity) and the complete frack and produce when economically favorable or to space out productive wells. Try searching for DUCs... drilled but not completed wells.

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“You can know the name of a bird in all the languages of the world, but when you're finished, you'll know absolutely nothing whatever about the bird... So let's look at the bird and see what it's doing -- that's what counts.” ― Richard P. Feynman

There is a lag between the startup of the rig and actual flow of oil. To show the future effect of the rig count on oil production, they have moved the rig count to the right in time (e.g. moved each new rig count out 3 months), giving an estimate of future oil production.

I have attached a couple of charts....5 year charts......that show where the price of oil (West Texas Intermediate) has been over the last 5 years. As well....I have attached a 5 year chart of ExxonMobile (XOM).

For informational purposes only.....Sometimes we forget where things WERE 3 - 5 years ago...

Exxon and Chevron report their quarterly earnings on April 28th next week. I expect that they are LIKELY to reduce their dividends by the end of this October (that would be one of the next 3 earnings reports).

So...if it doesn't happen this quarter.....I think it will happen in their quarterly report in July or October. Clearly....the price of oil/gas over that time WILL have a large impact.....as well as the direction that renewable energy resources take. I think they are boxing themselves into a corner that they can only get out of by changing/altering their business model......as others are doing in the energy space.

...All but 9 percent of publicly-owned land in this corner of New Mexico has been leased out for industrial profit. In late January, the Bureau of Land Management (BLM) sold another four drilling leases at auction, despite prolonged protest from native people who still live there, conservationists who fear the permanent destruction of something precious, and local businesses that make their money from interacting with this landscape rather than ripping it apart....

The Middle East has an outsize impact on energy here on Earth. One analyst thinks some regional powerhouses may leverage that role into the development of natural resources in space.

Countries like the United Arab Emirates and Saudi Arabia are developing space programs and investing in nascent private space commodity initiatives, said Tom James, a partner at energy consultant Navitas Resources. Doing so could give them a foothold in building extraterrestrial reserves of water -- a substance likely to fuel travel within space -- and other resources that could be used for in-space manufacturing.

“Water is the new oil of space,” James said in Singapore. “Middle East investment in space is growing as it works to shift from an oil-based to a knowledge-based economy.” ...

And the US rig count just keeps going up, at least they have Trump slashing any costly regulations he can find to help them reduce their break-even! This year could turn out to be a pricing nightmare for the oil companies and oil exporters.

I knew the O&G industry would do ANYTHING to slow down renewable energy. The upcoming "examination" of the grid by resident rocket scientist Rick Perry.....is meant to cast doubt on the ability of wind and solar energy.

Watch this one closely over coming months..... Anything that advances the US fossil fuel industry will also slow down the US renewable energy industry and put it further behind countries like China and Germany.

The fossil fuel industries are trying to slow the transition, as is the nuclear industry, but they won't be able to slow things very much. This is a global transition, not limited to a single country or small number of countries.

I think we need to expect some slowdowns in some places, sometimes. But as the fossil fuel and nuclear industries lose their economic standing they lose their political power. And at the same time the renewable energy industries are becoming stronger and stronger.

When President Obama came to office there were about 80,000 people working in coal. Oil employes That dropped some and will continue to drop. During the same period solar grew until it employs over 80,000 and wind now employs over 250,000 workers. The net worth of coal companies has plummeted. Political power is shifting away from coal and to wind and solar.

The fossil fuel industries are trying to slow the transition, as is the nuclear industry, but they won't be able to slow things very much. This is a global transition, not limited to a single country or small number of countries.

I agree it won't slow down the transition the WORLD is making. It just puts the US further BEHIND than it would be otherwise.

The truth isn't going to go away.....they are just trying to hide the truth as long as they can....and pump out as much oil as they can. Of course....that may not make the wind folks in Iowa, Oklahoma, and Texas real happy.

One of the factors slowing the switch to renewable is the low cost of oil and the ridiculously low price of gas. If we still had $100 oil, and comparable gas, we'd be far ahead of where we are now, and the market heading even lower will shelve even more transitions.

One of the factors slowing the switch to renewable is the low cost of oil and the ridiculously low price of gas. If we still had $100 oil, and comparable gas, we'd be far ahead of where we are now, and the market heading even lower will shelve even more transitions.

Yes and no. Yes in the shorter term......no in the longer term. By having the price of oil and gas so low.......that has PUSHED the renewable energy folks to push down harder on their cost structure. The cost of renewables is heading LOWER STILL, while the efficiency INCREASES AT THE SAME TIME.

Oil and gas folks are boxing themselves into a corner in the longer therm. Not intentionally.....its just that the cost of renewables and storage for renewable energy has much further to fall.....and oil and gas won't be able to compete. We're NOT THERE YET.....but renewables are getting there much quicker than I would have thought 5 years ago. Another 2 - 3 years or so.....and the O&G folks will be in more dire straits.

And the Mideast O&G folks KNOW THAT. Which is why Saudi Arabia is trying to do an IPO for Saudi Aramco to get some value out of their assets.....and why the Mideast as well as northern Africa is moving quickly into renewables.

Investment levels remain depressed, and exploration spending is poised to fall for a third straight year in 2017, IEA said in a new report.

Energy companies have canceled or delayed $1 trillion in planned projects by one count, as oil prices remain mired in a slump going back to the summer of 2014. The price collapse was sparked by a boom in U.S. production and compounded by OPEC's refusal to cut output during the first two years of the downturn....Offshore drilling projects account for a big part of the pullback. Last year, just 13 percent of conventional oil projects that got the go-ahead were offshore. That compares to an average of 40 percent of projects between 2000 and 2015.

Those figures do not bode well for President Donald Trump's goal of increasing offshore drilling in the U.S. Outer Continental Shelf. He is expected to sign an executive order on Friday aimed at rolling back offshore drilling limits imposed by President Barack Obama....But shale cannot make up the shortfall in conventional oil development: Conventional sources account for 69 million barrels a day of the current global output of 85 million barrels a day.

"Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in US shale production," Dr. Fatih Birol, IEA's executive director, said in a statement. "The key question for the future of the oil market is for how long can a surge in US shale supplies make up for the slow pace of growth elsewhere in the oil sector."

Looks like we may have the classic case of the pig cycle in the oil market, exacerbated by shale oil production. In the short-term the oil prices collapses, driving down new investment. Years later, not enough new supply to overcome depletion and major delays in getting new projects started = big price jump.

The three big variables here are (1) how high can shale go in the US, and can other shale deposits continue the growth - such as Argentina (2) when will the electrification of transport start having a serious effect upon oil demand? (3) will there be significant government climate action that cuts into oil demand?

If (1) bridges us to (2) and (3), the oil price will stay very low for a long time. The major producers may then start pumping to the max as they realize that their market is slowly vanishing.

The US buys ~40% of it's crude from Canada. Trump already placed a 20% tariff on Canadian softwood. If he wants higher gas prices in the US, all he has to do is put a similar tariff on Canadian oil. He's already been bitching about unfair energy trade between the US & Canada so this is his opportunity to start a real trade war.Canada of course provides large amounts of very cheap electricity to the States, so perhaps he'd prefer brownouts & blackouts & sky high electrical bills to high oil prices, he's not always clear about just how Canada has been cheating.Terry

The US should stop messing with their northern resource colony. You may need us to accept significant numbers of settlers once sea level rise gets going, although a good number of them may be Canadian "Snow Birds" who's winter home is no longer available.

Most Canadian oil is from the Tar Sands, so good chance that it gets priced out of the market in the late 2020's, if transport electrification really takes off. Canada should be developing their renewable resources as fast as possible to be able to deal with that possibility. Our government still seems to be too much in awe to the old fossil fuel dinosaurs.

"As has been the case since the beginning of the year, the main dynamic is how the OPEC production cuts stack up against the pace of growth from U.S. shale and others. By the end of the year, the U.S. could add 860,000 bpd of new supply, a sharp increase from expectations from just six months ago. The upward revision comes even as oil prices have failed to move much above the $50 per barrel threshold. In other words, U.S. shale drillers are “roaring back,” as Goldman Sachs recently put it, at a much faster clip than everyone expected. And the gains are coming even as oil prices are not rising as much as many had hoped.

On the other hand, the weakness in the market could be starting to deflate the momentum of U.S. shale – the blistering growth rate is starting to show some signs of slowing down. For the week ending on April 21, the shale industry only added 5 oil rigs back into operation, the lowest weekly figure since February. The previous five weeks saw rig count increases more than twice as high."

So a lot of additional oil production still in the pipeline, but the rate of increase may slow in a few months as a lagged effect to reduced increases in rig count.

Energy Transfer Partners — the company behind the controversial Dakota Access Pipeline — has spilled drilling fluid into two pristine Ohio wetlands this month, according to information reported to the Ohio EPA....Earlier this month, a Texas state legislature committee advanced the nomination of Energy Transfer Partners CEO Kelcy Warren to serve on the state’s Parks and Wildlife Commission. Warren was appointed by Gov. Greg Abbott (R) in 2015 — giving the Dallas billionaire influence over how the state’s natural and cultural resources are used — but is just coming up for confirmation now. Ruth Hopkins, a Dakota/Lakota Sioux writer, said on Twitter that appointing Warren to the commission was like “giving Darth Vader a spot on the Jedi Council.”...

OPEC is still having problems maintaining the price of oil. It is still the supply/demand conundrum. They will HAVE to extend the OPEC cutbacks in order to prevent a swift oil price DECLINE. But even if they do extend the cutbacks.....that isn't going to RAISE the price of oil. There is still too much inventory.....and even WITH the oil cutbacks over the last 5 months....it hasn't eaten into the oil inventory that much. There has only been an oil inventory drawdown in 6 of the last 18 weeks.

And now....I it looks like "cheating" on the part of some of the OPEC members is on a slight increase.

And in the meantime....there is that VERY SMALL issue now of renewable energy. It is very small now....but the trouble is that it is growing quickly. And that nagging little problem now will NOT be going away. The "absolute numbers" on that issue won't be big for a few more years....but they ARE big enough to have an effect on price. And it will only continue to get worse.

No wonder Rick Perry and the Trump circus is trying to slowdown renewables....

Unless oil prices firm up at $50 or higher we don't need to worry about anything more than token drilling in the Arctic. And only stupid oil companies we bother.

Oil demand will drop. We don't know if there will be enough electric cars, trucks and buses on the road by 2025 to create a meaningful demand drop but it would be foolish to vote against that happening by 2030.

There's pretty much no way to establish an oil extraction program in the Arctic for at least ten years and that puts us late into the 2025 - 2030 window.

Plus US shale oil should continue to set the price ceiling at $50/barrel. Any short term demand spikes will send rigs into the shale fields. Hard to see how oil could ever get close to the cost of extracting Arctic oil.

Unless oil prices firm up at $50 or higher we don't need to worry about anything more than token drilling in the Arctic. And only stupid oil companies we bother.

Next leg down in oil is starting. Exxon....Sunoco....Chevron....etc.....looks like they are all starting to "break down". And they should. Too much oil.......

Will be interesting to see if oil trys to test the $30 area eventually. Anything is possible. Long term....the Saudi's have to be kicking themselves for not taking Saudi Aramco public a few years ago....

Electric cars are set to take off in a few years as battery costs CONTINUE TO DROP.....and the batteries continue to be (1) more efficient (2) longer range (3) last longer. Five years from now....you'll be looking at batteries that are approaching 500 miles or more.

That will really put a "lid" on oil prices a few years from now. And a few years from now.....when there are WAY MORE electric cars....people will be looking at their next car purchase and thinking: "Should I buy a car that is going to be worthless in 3 MORE years?"

Oil just doesn't seem to find a place of resistance right now, natural gas has started to break down as well. General commodity complex also seems to be breaking down (e.g. copper).

The hard data out of the US has been pretty bleak recently, plus China seems to be reducing demand (iron ore prices have been taking a dump). So, maybe some expectations of demand slowing/falling as well as OPEC not being able to constrain supply. That would be a pretty wicked combination, and one that could see much lower prices.

By the time they get the Keystone Pipeline built....it will be carrying AIR.....

I don't get very worked up over the Keystone or Arctic drilling. Even if they start up they are very, very likely to be extinct soon after.

Some idiot want to waste his money opening a new coal mine? Well, we need to transfer some wealth from the richest to workers....

I know the mechanics of pumping oil is different than pumping water, but I still wonder if, at some point, climate change will drive the initiative to use old oil pipelines to move water to needy locations.

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People who say it cannot be done should not interrupt those who are doing it.

Plunging oil prices show OPEC has lost its grip on the market- WTI crude dropped to below $46 a barrel Thursday, levels not seen since OPEC agreed to slash output by 1.2 million barrels a day in a bid to shrink huge stockpiles around the world.- OPEC is expected to extend those cuts when it meets again in three weeks.- Compliance to the cuts "is as good as it's going to get for them, and it's still not working," said one trader.http://www.cnbc.com/2017/05/04/plunging-oil-prices-show-opec-has-lost-its-grip-on-the-market.html

Goodbye Tar Sands, and high-priced Calgary real estate. They should be building out their wind and solar resources before the pain really hits. Of course, they won't. It's Alberta, funny that even Texas has seen the way the wind is blowing!

Goodbye Tar Sands, and high-priced Calgary real estate. They should be building out their wind and solar resources before the pain really hits. Of course, they won't. It's Alberta, funny that even Texas has seen the way the wind is blowing!

If I lived in a place where oil is making the cost of houses high I'd seriously think about selling and renting. If I wanted to stay there long term I'd sell/rent and buy something as nice or nicer for a lot less money after the upcoming crash.

No way would I own real estate in places like Miami where rising sea levels are going to ruin property and property values.

Goodbye Tar Sands, and high-priced Calgary real estate. They should be building out their wind and solar resources before the pain really hits. Of course, they won't. It's Alberta, funny that even Texas has seen the way the wind is blowing!

Suncor still made a profit. Overall cost per barrel was $17US.

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“You can know the name of a bird in all the languages of the world, but when you're finished, you'll know absolutely nothing whatever about the bird... So let's look at the bird and see what it's doing -- that's what counts.” ― Richard P. Feynman

DrTskoul "Suncor still made a profit. Overall cost per barrel was $17US."

That's Cash Operating Cost, excluding interest and depreciation on the up-front large-scale investments, plus the cost of regularly replacing worn out equipment. Its a non-standardized non-GAAP measure that oil companies use to put a rosy as possible picture on things (they can exclude lots of other things as well as they are using a non-standardized definition, e.g. transportation costs). The Full Cycle cost contains all the costs, is much much higher, as detailed in this very good article:

Here's a longer look at WTIC (West Texas Intermediate Crude) price. I've drawn in two POSSIBLE chart formations. No rocket science here....I am just LITERALLY connecting the dots. And keep in mind that buyers/sellers FORM THE CHART.....not the other way around. But this gives an interesting picture of oil price over the LONG TERM.....and a possible look of where it MIGHT go in the future.

You can see the black lines A and B....form a LONG TRIANGLE. Will oil price stay within that triangle until it "breaks out" of that triangle (either up or down)......OR.....is there an new long term formation that is black line A and red line C? Is oil going to stay within that BROAD RANGE over the coming years/decades?

Looking at the SHORT TERM FUNDAMENTALS (up to 1 year out) I would have to say the chances of oil breaking DOWN to the "red line C" are pretty good. And if we DO break down over the coming 4 - 12 months....there WILL be a time where we start to dig into oil inventories MORE than we have been.....and if we run low enough on inventories (as well as a lack of new oil wells coming onto the market)....then we have the conditions for an oil RALLY back UP.....maybe as high as the $75 - $80 area over 2 - 3 years time.

My own PERSONAL OPINION is that we are indeed in a LONG DOWNWARD TREND for many years....and maybe a couple of decades for oil price.....within the parallel lines formed by line A and line C. There can be BIG swings within that broad range....based on supply/demand. But over the longer term.....oil looks VERY BEARISH,both fundamentally AND technically IMHO.

I believe some oil companies have waited too late to change their business model.....and Saudi Aramco is definitely kicking themselves for not taking Saudi Aramco public back in 2013 or 2014.

I found this interest chart online. It should give us some idea of the price point that takes oil producing countries out of the market. As demand drops this should be roughly the progression of companies no longer being oil producers.

It does not take into account the type of oil produced. A country that can sell sweet crude is likely to force out a slightly cheaper producing country selling sour.

My guess is that 20 years from now (barring changing events like war) most of the world's oil demand will be met by the low cost three - Iraq, Iran and Saudi Arabia.

BUT Beware. Russian TV have a business programme called "boom-bust". A good description of the oil and gas markets. All it needs is another political crisis - e.g. Venezuela's civil unrest morphing into a civil war, and all bets are off.